Thoughts on business, entrepreneurship, and life from a Silicon Valley entrepreneur and writer.

Thursday, March 22, 2001

Market Research, or "Who Buys This Shit?":

To make money, you have to sell a product or service. To sell a product or service, you have to offer value to a customer who is willing to pay.

It sounds simple, but the bubble made millions forget.

When you're starting a company, you always have to put yourself in your potential customers' shoes and ask, "Honestly, would I buy this." If there's any doubt, head back to the drawing board.

The bubble made people believe that the idea was everything. MBAs, consultants, and investment bankers specialize in this kind of top-down thinking, so they crafted extremely persuasive stories around these ideas.

Attractive young people with fancy pedigrees produced beautiful PowerPoint slides with hockey-stick charts. They filled their pitches with magic incantations, and gesticulated with holy passion. The VCs saw the vision and opened up their checkbooks to these "paradigm-breaking" companies.

And you know what? Less than 1% ever bothered talking to a customer first.

It's easy to skewer with hindsight, which makes it politically incorrect, but it's still worth doing. Would you ever buy dog food online? Designer clothes? Furniture for your home? I've bought all of those things, but I'd never buy them online. It just doesn't make any sense.

But it wasn't just the B2Cs that lost sight of the need to sell. Take the B2B exchanges. Please. How many ever bothered to talk seriously with the actual purchasing managers and salesmen, whose personal relationships make that business go?

If you want to succeed, do the following:

1. Talk to potential customers before you plan out your product. If you've already decided what to do, their feedback will be useless.

2. Don't leave any room for ambiguity. Ask them, point blank, will you buy my product at X price? Get them to schedule delivery if you can. "Yes, that looks interesting" just ain't good enough.

3. Keep talking--and listening. If you've got a new competitor, your customers will know. If your product desperately needs a facelift, your customers will know. If you are secretly plotting to defraud your customers, they will know.

Remember, to make money, you have to convince someone else to part with theirs. It's not easy, but nothing worth doing ever is.